The Housing Bubble

A weekend topic starting with Vulture. “HGTV was the third-most-popular network on cable television in 2016, a 24/7 testament to the powers of Target chic, the open-plan kitchen, and social conservatism. It unspools with the same bland cheerfulness as Leave It to Beaver, and its heart is in the same place. Many viewers — in red states and blue cities, in rent-controlled studio apartments and 6,000-square-foot McMansions — confess it’s a bedtime ritual, prelude to a night spent dreaming of ceramic-tile backsplashes and double-sink vanities.”

“Over the past two years, it has become such a ratings and advertising sensation that it is largely responsible for the recent sale, this summer, of its parent company, Scripps Networks Interactive, to Discovery Communications for $11.9 billion.”

“We are supposed to be in rehab from our housing binge of ten years ago, the one that nearly bankrupted the country. We are supposed to be in a state of contrition. But our national love of HGTV suggests that the dream won’t die. The longing it addresses is impervious to market corrections, or personal financial realities, and as economists continue to explore the true causes of the 2008 financial crisis, they are beginning to suspect that some speculative Americans acting on that longing got us into that mess as much as — or more than — unscrupulous bankers or Wall Street. In fact, the network may now be tempting its millions of fans to dip their toes back into the most dangerous waters of the past crisis: flipping.”

“It was in 1999 that the network found its audience with a new show called House Hunters, of which there are now an astounding 1,772 episodes. The early episodes are very different from what the show has become; they were full of the pitfalls of buying a house for the first time. Today, House Hunters, like all HGTV shows, follows a formula as inflexible as the Latin Mass. But just as the mild stimulant of Decorating Cents made way for the Adderall of House Hunters, so did the latter prepare viewer and network for the speedball of flipping, which is now the core of the network’s most successful shows and which may be the most dangerous part of a national obsession that has caused us all great grief in the past and possibly even spurred that global financial crisis. It all began with Property Brothers.”

“The Property Brothers don’t flip houses; they remodel for individual clients. But viewers found that they loved watching the process of a butt-ugly house getting transformed into an open-plan showplace. Soon, a new HGTV genre was born: shows about married couples (he’s a contractor, she’s a designer) who buy and flip houses together. Once the network started putting a married couple with star power on a show — and featuring not just the houses they were flipping but also their own homes and their children and happy moments from their daily lives — it jump-started the ratings streak that has made it so successful.”

“We really shouldn’t be watching this much HGTV during our rehab. Although it’s a soothing experience, it is also a fomenter of deep feelings of discontent about one’s living arrangements. The discontent gnaws as the addiction to the programming grows, and you have to imagine many viewers find themselves enticed to do foolish things like take out second mortgages so that they can blast out a few walls and get a little of what Chip and Joanna seem to have. More troublingly, we also have to wonder how many may be inspired to think that they, too, have what it takes to flip houses.”

“A recent, worrisome working paper released by the National Bureau of Economic Research reported on the tinder of the last conflagration: the national sense that housing prices were going up every day and that there was no way that a buyer’s reach could exceed his grasp. It’s true that bankers made loans to Americans wildly unqualified for them — but the notion that buyers on the lower end of credit distribution began to default in unprecedented numbers isn’t accurate. In fact, the rate of default in the subprime market throughout the bubble and the bust remained steady compared with before the crisis.”

“It was buyers from the top and middle top who account for the skyrocketing rate of default — and it wasn’t that they were buying bigger family homes that they couldn’t afford. It was that they were buying additional houses to flip for a profit, and when holding on to them stopped making financial sense, and with no personal and emotional connection to them, they began walking away in huge numbers.”

“And yet … the flippers on HGTV make it look so simple, so fun. At the end of each episode, they run the numbers and show how much the happy couples have pocketed. What could the network be quietly motivating its viewers to do? With our real-estate-loving president — who has Property Brothers programmed into the TiVo on Air Force One and who is eager to do away with regulations, which are one of the forces supposed to protect us from another bust — we could be in the early stages of another crisis. Our collective fate could be largely in the hands of … Christina and Tarek El Moussa and however many people they inspire to pick up a house at a foreclosure sale.”

From Vice Magazine. “At the age of 24, making $35,000 a year working as an editorial aide at a newspaper, I bought some real estate: a 770-square-foot, one-bedroom condo in Northern Virginia. This was 2006, with the housing bubble at its most distended, basically the worst possible time to be buying a piece of real estate, and in the DC area, where inflated prices are the norm in any market condition. I avoided a subprime loan because I had the backing of my middle-class parents, but this was still a terrible, terrible decision.”

“Eleven years later I’m stuck in debt, besieged by bank fees, and unable to get myself out of what has become a life-altering real estate clusterfuck. Even as the country recovers from the crash of 2008, the financial crisis is still dragging me down.”

“Looking back, it’s easy for strangers to armchair quarterback my path to financial ruin. I obviously wasn’t making enough on my own to afford the place, and my career choice, print journalism, has never been known for its robust earning potential. And this was at a time when newspaper jobs were decreasing and digital media jobs were still few in number.”

“Nevertheless, my parents pressed me on the idea of home ownership. I told them I had heard there might be a housing bubble. They brushed it off. I worried what would happen if I suddenly had to move to another city for work, a very real possibility for someone starting out in newspapers. They told me if I didn’t buy then, there was a good chance I’d never be a homeowner. I’m not sure that warning would bother me now, but evidently it spooked me then. Bottom line, I was a 24-year-old being gifted with what seemed like a great opportunity. My parents were going to help me buy a home. Why say no to that?”

“I figured if my parents, who both had government jobs dealing in finance and had worked in banking before that, were confident, it would work out. This was also an era when some people were making small fortunes flipping houses. I figured I could live in this place for a few years, move if I had to, and maybe come away with a little extra money.”

“I was wrong: Today I’m still living in the condo, but just barely hanging on. I can’t sell the place. Mine is one of about 5.5 million, or nearly 10 percent of all US mortgages, that currently underwater, meaning I owe more than the property is worth.”

“I’m struggling to stay afloat and taking on a punishing work schedule in a desperate attempt to stick it out and avoid foreclosure. The equity I’ve built is closing in on the point where it might cover the value the property lost in the crash. That’s being optimistic. Even after more than a decade forking over interest on a mortgage, the idea of simply breaking even—getting away from this condo with nothing to show for it—sounds like a dream. But I’m worried I won’t make it to that point, much less ever get close to owning the place outright.”

“I would be fine with foreclosure, even though that would wreck my credit, simply to move on and extricate myself from this mess—but because my parents are also tied up in the purchase, bankruptcy or foreclosure would harm them, as well. So with no ability to relocate for better work or lower monthly bills, I press on, at least for now.”

“Earlier this year, one of the endless array of reductive takes about millennials made the rounds online, this one regarding my generation’s tendency to eschew home ownership. The reasoning, put forth by some Australian millionaire I’d never heard of and hopefully never will again, was that millennials spend too much on frivolous things like avocado toast and fancy coffee instead of saving toward a down payment on a home. In no time at all people pointed out the flaws in this argument: Experts say millennials are actually more frugal than Boomers in their spending habits. It also doesn’t help that since the crash home builders have concentrated on high-end properties, and not the sort of starter homes young first-timers could afford.”

“But my experience suggests another reason millennials don’t buy homes. Maybe they just know what they’re doing.”